This case is presented to the Commission for decision based upon stipulated
facts, exhibits, and briefs. Petitioner Gregory Thornton is represented by Fryberger,
Buchanan, Smith & Frederick, P.A., by Attorney Joseph J. Mihalek. Respondent
Wisconsin
Department of Revenue is represented by Attorney Sheree Robertson.

Having considered the entire record before it, the Commission finds,
concludes, and orders as follows:

FINDINGS OF FACT

As and for its Findings of Fact, the Commission adopts the facts as stipulated
to by the parties, deleting references to exhibits and editing for clarity of content.

1. Petitioner is currently domiciled in the state of Minnesota and has
been since birth, except for a brief period from 1981 to 1983 when he lived in the U. S.
Virgin Islands.

2. On or about June 8, 1998, petitioner purchased from Roger and Marion
Brinks ("the Brinkses") a 1977 Grand Banks 32-foot trawler boat, title number
367X3060063T, hull identification number GNDB05770177, known as Diamond Cutter II
(" the boat").

4. On or about May 14, 1998, petitioner contacted Complete Yacht
Services ("Complete Yacht"), a boat brokerage firm in Vero Beach, Florida, after seeing a
boat listed on its internet web site. Thereafter, Complete Yacht negotiated the purchase
of the boat on behalf of petitioner.

5. Petitioner purchased the boat from the Brinkses for $74,000.

6. Before petitioner purchased the boat, title was registered to the
Brinkses in the state of Michigan.

7. Petitioner's boat broker, Complete Yacht, received title documentation
for the boat from the Brinkses' boat broker Eldean. Atlantic Boat Documentation, Inc., then
sent the title to petitioner by United States mail on or about August 26, 1998.

8. Petitioner did not pay sales tax on his purchase of the boat to the states
of Michigan, Florida or Minnesota.

9. On or about June 28, 1998, petitioner took physical possession of the
boat from the Brinkses in Charlevoix, Michigan.

10. On or about July 4, 1998, petitioner began berthing his boat in
Wisconsin at Barker's Island Marina ("Barker's Island"), located on Lake Superior in
Superior, Wisconsin, and has continuously berthed his boat at Barker's Island since that
time.

11. Petitioner has stored his boat at Barker's Island in the off season since
approximately July 4, 1998.

12. Petitioner has used his boat in the waters of Wisconsin, Michigan, and
Minnesota.

13. On October 5, 1998, petitioner registered his boat with the Wisconsin
Department of Natural Resources ("DNR") and, by check dated October 19, 1998, paid to
the state of Wisconsin a $3,700.00 use tax, $5.00 lien fee, and $30.00 registration fee, for a
total of $3,735.00.

14. By notice dated January 5, 1999, the DNR informed petitioner that he
owed $370.00 of Douglas County sales/use tax and an additional $5.00 registration fee, for
an additional liability of $375.00. Petitioner paid the additional amount by check dated
January 15, 1999.

15. Under date of September 21, 1999, petitioner filed with the
Department a claim for refund of use tax in the amount of $4,075 which he had paid to the
state of Wisconsin and Douglas County.

16. Under date of March 24, 2000, the Department denied petitioner's
claim for refund.

17. Under date of May 17, 2000, petitioner filed with the Department a
petition for redetermination, objecting to its denial of his claim for refund.

18. Under date of July 17, 2000, the Department issued to petitioner its
Notice of Action, denying his petition for redetermination.

19. On July 25, 2000, petitioner filed a timely petition for review with the
Commission.

APPLICABLE WISCONSIN STATUTES

77.53 Imposition of use tax.

* * *

(17m) This section does not apply to a boat purchased in a
state contiguous to this state by a person domiciled in that
state if the boat is berthed in this state's boundary waters
adjacent to the state of the domicile of the purchaser and if the
transaction was an exempt occasional sale under the laws of
the state in which the purchase was made.

CONCLUSION OF LAW

Petitioner is not entitled to an exemption from the use tax because he has not
shown that section 77.53(17m) of the Wisconsin Statutes violates the equal protection
clauses of the Wisconsin or federal constitutions or the commerce clause of the federal
constitution.

OPINION

The only issue presented in this case is whether section 77.53(17m) of the
Wisconsin Statutes is constitutional. Petitioner challenges the constitutionality of the
provision in section 77.53(17m) that limits the applicability of the exemption to purchases
made within the state of the purchaser's domicile. Petitioner argues that this limitation is
invalid on two grounds. First, that the statute violates the equal protection guarantees of
the Wisconsin and United States constitutions. Second, that the statute violates the
commerce clause of the United States constitution. (1) We disagree with each of petitioner's
assertions. (2)

Equal Protection

The guarantee of equal protection in the Wisconsin constitution is
substantially the same as its federal counterpart. Midcontintent Broacasting Co. v.
Dep't
of Revenue, 98 Wis. 2d 379, 402 n.15 (1980). A legislative act will be "declared
violative
of equal protection only when the legislature has made an irrational or arbitrary
classification, one that has no reasonable purpose or relationship to the facts or a proper
state policy." Milwaukee Brewers v. Dep't of Health & Social
Services, 130 Wis. 2d 79, 99
(1986). "A classification will be held constitutional if there exists a rational and reasonable
basis for different treatment." Funk v. Wollin Silo & Equipment, Inc.,
148 Wis. 2d 59, 69
(1989). An "equal-protection violation is not to be found merely because some inequity
results from the classification." Id.

When it enacts tax statutes, the legislature is given wide latitude, GTE
Sprint
v. Wisconsin Bell, 155 Wis. 2d 184, 194 (1990), and the burden to overturn a
statute creating
a tax exemption as violative of equal protection is particularly great:

There is, however, a strong presumption that legislative enactments
are constitutional, and the burden on one asserting the unconstitutionality
of a properly enacted statute is heavy indeed.

Moreover, where a tax measure is involved, the presumption of
constitutionality is strongest. . . .

This court has recognized that the equal-protection clause, unless apparent
misclassifications are gross indeed, is of little moment in determining the
constitutionality of a state tax. . . .

". . . a legislature has more leeway in granting exemptions in taxation
measures than it does in regulatory measures under its police power
without running athwart the equal-protection-of-the-laws clause of the
Fourteenth amendment."

Petitioner argues that this statute simply distinguishes between Minnesota
residents who buy boats in Minnesota and Minnesota residents who buy boats elsewhere.
Petitioner further asserts that the purpose of the law is to encourage boaters from
neighboring states to venture into Wisconsin waters without fear of a tax liability.
Petitioner oversimplifies both the purpose and consequence of section 77.53(17m). A
careful review of this statute in light of the entire sales and use tax scheme tells a different
story. Section 77.53(17m) exempts from the use tax:

1. A boat purchased in a state contiguous to
Wisconsin

2. by a person domiciled in that state

3. if the boat is berthed in Wisconsin's boundary
waters adjacent to the state of the purchaser's
domicile, and

4. if the purchase of the boat was an exempt
occasional sale under the laws of the state in which
the purchase was made.

It is important to place this statute into the context of the use tax. With certain
exceptions,
the use, consumption or storage of tangible personal property in Wisconsin is subject to
the use tax regardless of where the tangible personal property is purchased. Wis. Stat.
§
77.53(1). If the retailer from whom the tangible personal property was purchased has
remitted sales tax to respondent, then the purchaser is not liable for the use tax. Wis. Stat.
§ 77.53(2). Similarly, the person consuming, using or storing tangible personal
property
purchased in another state is entitled to a credit against his or her use tax liability for any
sales tax paid to that other state when the item of tangible personal property was
purchased. Wis. Stat. § 77.53(16).

The general policy, therefore, is that the use, consumption or storage of
tangible personal property in Wisconsin is subject to a tax equal to 5% of the sales price,
with credit given for sales taxes paid here or to other states. Thus, if any person
(regardless of residence) uses a boat in Wisconsin waters, and that person did not pay
Wisconsin sales tax on the boat or did not pay sales tax to another state equal to what the
Wisconsin sales tax liability would have been, then that person has a use tax liability.

Section 77.53(17m) creates a very narrow exception to this general policy. If
a resident of an adjoining state buys a boat in that state and if the purchase is an exempt
occasional sale in that state, then no use tax is imposed if the boat is berthed in Wisconsin
boundary waters adjacent to the state of purchaser's domicile. An example demonstrates
how very narrow this exemption is. Assume a Minnesota resident buys a boat at a garage
sale in La Crescent, Minnesota, places the boat in the Mississippi River, crosses the river,
and berths the boat at a La Crosse, Wisconsin, marina. Up to this point, the Minnesota
resident has incurred no Wisconsin use tax liability. But once the purchaser pilots the boat
up the La Crosse River, the exemption no longer applies, because now the boat is being
used in Wisconsin waters other than a boundary water. Similarly, the exemption would
not apply if the Minnesota resident takes the boat down the Mississippi River to Prairie du
Chien, Wisconsin, because the boat would be in a boundary water that is adjacent to Iowa,
not Minnesota. Finally, the exemption does not apply if the Minnesota resident bought the
boat from a dealer in Minnesota, because now the sale is not an exempt occasional sale
under the laws of Minnesota.(3) This
exemption is too narrow to have the purpose of
encouraging commerce. Rather, it is obvious that this exemption merely has the purpose
of respecting the exempt nature of occasional sales of boats in bordering states, provided
the use of boats in Wisconsin waters is limited.

With respect to boats purchased by Minnesota residents, the requirement that
the boats be purchased in the purchaser's state of residence is superfluous because this is
a requirement to qualify as an exempt occasional sale in Minnesota. In order to qualify as
an exempt occasional sale under Minnesota law, the sale must occur in Minnesota. Minn.
Stat. §297A.25(12)(a), now codified at §297.67(23).

Understanding the purpose, context, and application of this exemption, we
examine it in light of the guidelines set forth by the Wisconsin Supreme Court.
Does this
statute establish a classification that makes one class really different from
another?GTE
Sprint, 155 Wis. 2d at 194. We conclude there are real distinctions between the
classes
created by the statute. With respect to the facts of this case, the statute creates a distinction
between Minnesota residents whose boat purchase qualifies as an exempt occasional sale
and those whose purchase does not qualify but have not paid the Minnesota sales tax.(4)
The requirement that the purchase be an exempt occasional sale under the laws of
Minnesota is tantamount to requiring that the purchase be made in the purchaser's state
of residence. Moreover, when one looks at the overall statutory scheme, it is obvious that
the intent is to provide a limited exemption for residents of neighboring states whose
purchase qualifies as an exempt occasional sale in their own state, provided their
incursions into Wisconsin waters are limited to the boundary waters between their state
and this state. We conclude that there is a real difference between purchases that are
legitimately exempt from the use tax as an occasional sale and purchases that do not
qualify for this exemption but where the purchaser has managed to evade any sales or use
tax liability.

Is the classification germane to the purpose of the law?GTE Sprint, at 194.
We conclude the classification is germane. The purpose is to provide a limited use

tax exemption to purchasers who qualify under their own state's occasional sale use tax
exemption. Requiring that the boat be purchased in the state of the purchaser's residence
avoids the precise situation presented by petitioner: a purchaser who has not paid any
sales or use tax, not by qualifying as an occasional sale but, rather, by keeping the boat out
of his state of residence. Without this classification, the scope of the exemption might be
greatly expanded.

The classification should not be based upon existing circumstances
and not
be so constituted as to preclude additional members from being included in the class.
Id.
We conclude the classification does not preclude extension to additional members. Any
Minnesota resident can become a member of the exempt class simply by following the
elements of the exemption statute.

To whatever class the law may apply, it must apply equally to all
members. Id. We conclude the law applies equally to all members of the class. Here,
the law treats
the same all members of the class who purchased a boat in their state as an exempt
occasional sale in their state, provided their physical incursions into Wisconsin waters are
limited as specified in the statute.

The classes should be so far different from those of other
classifications as to
reasonably suggest the propriety of having regard to the public good.Id. We conclude
the classification promotes a legitimate government interest by not extending a use tax
exemption to purchasers who have managed to avoid their own state's use tax by keeping
boats outside of their state's borders. We conclude that application of the guidelines set
forth in GTE Sprint fails to show that the classification created by section
77.53(17m) is
irrational or arbitrary and, therefore, fails to indicate any violation of equal protection.

Petitioner cites Williams v. Vermont, 472 U.S. 14, 105 S. Ct.
2465, 86 L. Ed. 2d
11 (1985), to support his position. Williams involved a challenge to a credit
provided for
the purchase of certain automobiles under the Vermont use tax. The Vermont use tax on
an automobile was reduced by the amount of sales tax paid on the automobile if the
automobile was purchased in Vermont. The use tax also provided an offset for sales tax
paid to other states, provided the person registering the car in Vermont was a resident of
Vermont at the time the sales tax was paid to the other state. Id. at 15, 105
S. Ct. at 2468.
The taxpayers challenging the Vermont use tax were residents of other states when they
purchased automobiles in other states. When these taxpayers moved to Vermont and
registered these vehicles in Vermont, they were assessed a use tax and not given credit for
the sales tax previously paid on the vehicles. Id. at 16, 105 S. Ct. at 2468.
The U.S.
Supreme Court held that the failure of Vermont's use tax scheme to give credit for the sales
tax paid on purchases of automobiles by nonresidents in others states violated equal
protection. Id.

In reaching its conclusion, the Court held that to provide a use tax "credit
only to those who were residents at the time they paid the sales tax to another State is an
arbitrary distinction that violates the Equal Protection Clause." Id. at 22,
105 S. Ct. at 2471.
In so holding, the Court determined that there was no legitimate purpose in the
discriminatory treatment of the statute, and based this determination on its prior holdings
that:

Unlike the use tax scheme in Vermont, the exemption at issue here provides
absolutely no benefit to residents or in-state taxpayers. This exemption is a matter of
legislative grace extended only to residents of contiguous states. Moreover, in
Williams
the issue was whether a person is subject to double taxation. Here, the issue is whether
a person pays a sales/use tax once or not at all. For these reasons, the holding in
Williams
is not on point. We cannot conclude that section 77.53(17m) violates equal protection.

Interstate Commerce

For more than a century, the courts have struggled with the limitations
imposed by the federal constitution's interstate commerce clause on state tax schemes. The
modern approach will sustain a tax on interstate commerce when the tax is "'[1] applied
to an activity with a substantial nexus with the taxing State, [2] is fairly apportioned, [3]
does not discriminate against interstate commerce, and [4] is fairly related to the services
provided by the State.'" Oklahoma Tax Comm. v. Jefferson Lines, Inc.,
514 U.S. 175, 183,
115 S. Ct. 1331, 1337, 131 L. Ed. 2d 261 (1995) (quoting Complete Auto Transit,
Inc. v.
Brady, 430 U.S. 274, 279, 97 S. Ct. 1076, 1079, 51 L. Ed. 2d 326 (1977)).

The only one of these four elements at issue here is whether the exemption
at issue discriminates against interstate commerce. A state tax violates this element of the
test if it discriminates against interstate commerce by providing an advantage to local
business; discriminates against foreign enterprises competing with local businesses; or
discriminates against interstate commerce in favor of intrastate commerce. Jefferson
Lines,
at 197, 115 S. Ct. at 1344; Goldberg v. Sweet, 488 U.S. 252, 266, 109 S.
Ct. 582, 592, 102 L. Ed.
2d 607 (1989). The exemption at issue does not favor residents or intrastate commerce at
the expense of outsiders or interstate commerce. If anything, the exemption treats certain
non-residents more favorably than residents. The problem for petitioner is that he is not
among the favored non-residents.

Petitioner cites Bibb v. Navajo Freight Lines, Inc., 359 U.S.
520, 79 S. Ct. 962,
3 L. Ed. 2d 1003 (1959), for the proposition that a state statute can burden interstate
commerce without discriminating in favor of residents. This 1959 case is of limited
assistance because it deals with a safety statute, not a tax statute. It would seem any
applicability to state taxes was eclipsed by the modern formulation set forth in
Complete
Auto. Moreover, even in Navajo Freight Lines, the Supreme Court
pointed out that it was
willing to overturn a non-discriminatory burden on interstate commerce because it was
shown to be so out of line with the requirements of other states. Id. at
529-30, 79 S. Ct. at
967-68. Petitioner has made no such showing here.

For these reasons, we cannot conclude that section 77.53(17m) violates the
commerce clause.

Therefore,

IT IS ORDERED

That respondent's action on petitioner's petition for redetermination is
affirmed.

Dated at Madison, Wisconsin, this 22nd day of February, 2002.

WISCONSIN TAX APPEALS
COMMISSION

___________________________________________

Don M. Millis, Acting Chairperson

___________________________________________

Thomas M. Boykoff, Commissioner

ATTACHMENT: "NOTICE OF APPEAL INFORMATION"

1 Even if petitioner were correct that this limitation is invalid, he would
not come within the terms
of the exemption statute. As is shown below, the purchase at issue does not qualify as an
exempt
occasional sale under the laws of Minnesota, which is a separate requirement under section
77.53(17m).

2 Respondent argues that in the event the Commission invalidates section
77.53(17m), it should
find that the proper remedy is to strike down the entire statute and preclude its application to
any
transaction. Because we do not find the statute invalid, there is no need to consider
respondent's
argument on the proper remedy.

3 Were the Commission to conclude that the portion of the statute
challenged by petitioner was
unconstitutional, on the facts in this record we could not conclude that petitioner is entitled to
the
use tax exemption because it appears that the sale at issue was not an exempt occasional sale
under
the laws of Minnesota. See, Minn. Stat. Ann. §297A.25(12)(a),
now codified at § 297A.67(23). In
addition, the record is ambiguous on whether the boat made incursions into Wisconsin waters
other than those boundary waters adjacent to Minnesota. In short, based on this record,
petitioner
has not shown that he is clearly within the terms of the exemption.

4 Minnesota residents who pay Minnesota sales tax on their boat purchase
do not have to pay
Wisconsin's use tax and, therefore, are not part of the equation.